Oil & gas industry turns to AI for billions in savings

1of3Baker Hughes CEO Lorenzo Simonnelli, left, comments about the new branding logo of Baker Hughes with the downgrading of GE ownership, as Chief Marketing and Technology Officer Derek Mathieson, right, listens during an interview with company officials at their offices Thursday, Oct. 3, 2019 in Houston, TX.Photo: Michael Wyke / Contributor

2of3Tom Siebel is founder, chairman and CEO of the Silicon Valley artificial inteligence company C3.ai. The software company signed a Tuesday, November 19, 2019 agreement with Houston oilfield service company Baker Hughes and tech giant Microsoft to boost adoption of artificial intelligence by the oil and natural gas industry.Photo: C3.ai / Courtesy Photo

3of3Judson Althoff is executive vice president of worldwide commercial business for tech giant Microsoft. The company signed an agreement with Houston oilfield service company Baker Hughes and Silicon Valley artificial intelligence company C3.ai to boost the adoption of artificial intelligence in the oil and natural gas industry.Photo: Microsoft, Photographer / Courtesy Photo

The oil and natural gas industry is turning to artificial intelligence technology to save billions of dollars in maintenance and production costs.

Houston oilfield services company Baker Hughes, tech giant Microsoft and Silicon Valley artificial intelligence company C3.ai have signed an agreement to develop and deploy the technology for industry customers around the globe, the companies said Tuesday.

In the oil field, artificial intelligence technology is being used to compile massive amounts of data transmitted by sensors and so-called smart equipment, look for patterns, make predictions and inform decisions by operators.

“Companies that adopt this technology will be the next Amazon, and those that don’t adopt will be the next Sears,” Tom Siebel, C3.ai founder and CEO, said in an interview.

Baker Hughes and C3.ai launched a joint venture in June to deploy artificial intelligence in the oil patch. The two will augment the technology using Microsoft’s cloud computing platform Azure.

“The combination of C3.ai and Baker Hughes is one of the most interesting joint ventures I have seen around digital transformation,” said Kevin Prouty, a group vice president for the Boston energy technology consulting firm IDC Energy. “Taking the artificial intelligence framework from C3 and applying it to the use cases from Baker Hughes is relatively unique.”

Many in the industry believe that artificial intelligence will allow oil and natural gas companies to improve oversight of equipment and develop better maintenance schedules that prevent failures in the field. So far, artificial intelligence remains a tool used by large companies with pipelines and plants and it has yet to be deployed at a large scale by the industry. But many analysts and industry officials believe the potential is there for wider adoption.

“There are literally billions of dollars at stake in savings just from improving equipment and asset uptime,” Prouty said.

Baker Hughes earns roughly one-tenth of its $23 billion in annual revenue from digital products. It is investing into artificial intelligence and other technologies ahead of a global energy transition in which natural gas and tech-dependent renewables such as wind and solar will make up a larger percentage of the power generation mix.

That transition is also taking place at the same time that the energy industry is adopting more digital services and technology. Baker Hughes CEO Lorenzo Simonelli said the agreement with C3.ai and Microsoft allows each company to tap into the industry’s digital transformation while focusing on individual areas of expertise.

“It’s very tough for an industrial company to be a software company and it’s very tough for a software company to have the experience of an industrial company, and it’s very tough to be at the cutting edge of artificial intelligence,” Simonelli said. “When you bring together these three companies, you get a capability that helps our customers be successful. That’s what is so powerful about this combination.”

European oil major Royal Dutch Shell has already signed up as a customer for C3.ai’s artificial intelligence platform on Azure. Shell is using artificial intelligence to monitor its operations around the world to optimize flows of oil and natural gas as well as better predict when equipment needs repairs.

With 38 major oil and gas companies already using Azure’s cloud computing service, Microsoft holds an estimated 70 percent of the industry market while competitors Amazon Web Services and Google are trying to make inroads.

Sergio Chapa covers the oil & gas industry for the Houston Chronicle and writes for Texas Inc., a weekly Monday insert dedicated to covering the most powerful business leaders in Texas. Sergio was born and raised in the Lone Star State and studied journalism at the University of Texas at Austin. He previously worked at the San Antonio Business Journal, KGBT-TV in the Rio Grande Valley and Al Día in Dallas.